Although you
wouldn’t know it from listening to all the bearish commentary out
there, silver is actually enjoying a strong young upleg. Its
technicals are very bullish, contradicting the prevailing pessimism
gripping traders. This glaring disconnect between price action and
sentiment won’t last forever. It has hammered silver stocks to
depressed levels that offer a smorgasbord of opportunity for brave
contrarians.

As a
hyper-volatile speculators’ playground, silver has always been
exceptionally sensitive to prevailing sentiment. While all prices
are affected by their traders’ collective greed and fear, silver’s
emotional roller coaster has higher peaks and deeper valleys.
Silver can skyrocket on greed like no other commodity, but the other
end of the sentiment pendulum’s arc is equally extreme. Fear can
depress silver for a long time.

And lingering fear
is what is plaguing silver sentiment today. For over a year leading
into this past summer, silver suffered a massive correction
following a near-parabolic surge to dazzling new secular-bull
highs. Such a long period of crumbling prices naturally spawned
incredible fear. So even after silver bottomed and birthed a major
new upleg, traders remain depressed and skeptical of its potential.

But despite
today’s rampant silver pessimism, this metal’s technicals are
crystal-clear in showing a strong young upleg now underway.
Gradually this bullish price action will bleed away the correction’s
residual bearishness, and fear will eventually yield to greed.
Corrections’ fear shadows always linger into the initial months of
their subsequent uplegs, and are a huge boon to contrarian
speculators and investors.

The mission of
trading is to buy low and sell high, and the only times
prices are low within ongoing bull markets is when they are deeply
out of favor following corrections. But it is risky to buy
before technicals confirm a correction has almost certainly ended.
As the bottom is reached, fear and pessimism peak so no one believes
a new upleg is being born. That bearishness persists into the
subsequent young upleg.

This fear shadow
creates a sweet spot for contrarians. As new uplegs stealthily
gather steam with little fanfare, price action eventually
confirms these major trend changes. But the great majority of
traders still remain bearish, their minds staying clouded by the
sentiment paradigm of the preceding correction. This leaves a
window where excessively-cheap silver-stock prices don’t yet reflect
silver’s bullish technicals.

And silver’s
latest young upleg has already been confirmed by a variety of major
technicals as this chart reveals. Its price action since its summer
low has been very bullish. While it amazes me more silver traders
don’t pay attention to longer-term charts, sentiment always remains
poor as new uplegs first start advancing. But as silver continues
to power higher on balance, residual bearishness fades away.

The seeds for
today’s price action were sown in early 2011. As silver rocketed
higher in its secular bull’s last massive upleg, greed waxed
euphoric. I warned about that
coming topping
in advance in March 2011 as silver grew overbought, and we realized
big silver-stock profits. With the largest upleg by far of silver’s
entire bull still screaming higher, the inevitable correction
following it promised to be ugly.

And it was, in
spades. When prices advance too far too fast, one consequence is
they suck in all near-term buying like black holes. Surging prices
put tremendous pressure on non-contrarian traders to buy immediately
or miss the boat. This pulls forward months’ worth of buying
that would have happened in the future into the topping. And once
all the buyers are in, only sellers remain so a price starts
falling.

Silver’s
correction began with a brutal
near-crash,
killing greed and ramping up fear very rapidly. Many of the new
buyers who had foolishly succumbed to the euphoria to buy high as
silver was topping started to panic. They wanted out immediately at
any price, spawning fear that continued to snowball and trap more
traders. The ultimate result was a massive 45.5% silver
correction over the subsequent 14 months!

That correction
formed a giant technical formation known as a descending triangle,
shaded yellow above. Silver couldn’t break above this descending
triangle’s sharply-downward-sloping resistance line no matter how
bullish conditions grew. Not even the summer of 2011’s last US
debt-ceiling debate, which ignited a
massive summer
rally in gold, could break silver free from its correction’s
sentiment chains.

And descending
triangles are bearish formations, heralding even lower prices
ahead. So the technicians understandably wanted nothing to do with
silver. But no matter how intense the fear and selling got, this
metal refused to fall below $27 or so. New buyers emerged around
these levels to create a multi-year support line that formed the
triangle’s base. But silver still remained trapped in this bearish
formation.

Until this past
August. After hitting its usual
summer-doldrums
lows, silver surged sharply. The start of its biggest
seasonal rally
of the year corresponded with widespread expectations that both the
European Central Bank and US Federal Reserve would launch major new
bond-buying programs. These would be highly inflationary,
the central banks creating money out of thin air to directly
monetize government debt.

This August surge
accelerated into September when the ECB and Fed indeed announced
major new debt-monetization campaigns as expected. The result was
silver utterly shattered the correction resistance line of its huge
descending triangle! And provocatively in technical lore, if a
descending triangle is resolved in a major upside breakout (instead
of a downside failure) the outlook is very bullish.

Another big clue
silver’s intermediate trend was reversing from correction to upleg
came through its 200-day moving average. During the massive
correction following that massive upleg, silver’s 200dma nosed over
to head south and became overhead resistance. Not even last
spring’s strong seasonals could overcome this. But soon after
silver’s triangle breakout in August, a decisive 200dma breakout
followed.

Silver rocketed
well above its 200dma as the ECB pledged to buy sovereign bonds and
the Fed launched its unprecedented open-endedthird
quantitative-easing campaign. In just over a month, silver had
gained nearly a third which is a fantastic early-upleg gain. But
like a smaller version of an upleg topping, this sharp initial
advance proved too far too fast. So silver needed to pull back to
rebalance sentiment.

Pullbacks within
ongoing uplegs are healthy and common. The faster and higher prices
rise, the more greedy traders as a group become. Unchecked greed
threatens to pull forward too much buying, which has the potential
to kill uplegs prematurely. So once all near-term buyers have been
sucked in, sellers gain control sparking a pullback. And silver
obliged right on schedule, during a normal
seasonal lull.

But this pullback
was very telling technically as it bounced right at silver’s
critical 200-day moving average. What was resistance during the
correction had become support during the subsequent upleg! This was
another major technical confirmation that silver’s intermediate
trend had stealthily reversed from correction to upleg. And since
then silver has continued to advance on balance, even ignoring
gold.

Silver traders
have always looked to gold, so its price action dominates their
sentiment. When gold is up big, they rush into silver. And when
gold falls sharply, they dump silver aggressively. Provocatively
last month when gold slipped 0.4%, silver ignored its primary driver
to rally 3.7%! This big upside divergence is an impressive
show of strength, and really emphasizes that silver has fully
transitioned into upleg mode.

And this is
crystal-clear on silver’s chart. As you can see above, since early
August this metal has enjoyed its longest advance since its last
upleg. And this recent months’ rally has also been very upleg-like
in character. Despite the new ECB and Fed inflation that ignited
some excitement, silver’s latest run has been measured. This
contrasts with sharp and short-lived short-covering rallies in
corrections.

Taken together,
all this technical evidence virtually guarantees that silver is
indeed in a young new upleg. The lingering bearish commentary
arguing for silver’s correction to reassert itself is simply wrong.
Gradually it will abate as the correction’s fear shadow fades and
silver’s bullish technicals win over new converts to the young-upleg
thesis. And boy, a young silver upleg offers vast opportunities for
traders.

At best so far,
silver’s latest advance is 32.6% over 3.2 months. This would sound
impressive for most commodities and stocks, but silver is in a
league of its own. The reason silver perpetually fascinates
speculators and investors despite its extreme volatility is the
sheer size of its uplegs. As this next chart shows, silver uplegs
tend to accelerate and mushroom to enormous size in fairly short
periods of time.

Silver’s last
upleg that nearly went parabolic before cresting in spring 2011 was
gargantuan. We are talking about a mind-boggling 176.6% gain in
just 9.0 months! Of course that was atypically large, so the
subsequent reckoning led to the massive correction we just weathered
that ultimately nearly cut silver in half. But even silver’s normal
uplegs are quite big, showing the huge potential silver has today.

Its secular bull’s
first four major uplegs before that colossal fifth one saw gains of
71.5% in 6.0m, 124.0% in 8.5m, 80.5% in 6.5m, and 115.4% in 12.4m.
These first four that ignore the recent outsized beast average out
to gains of 97.9% over 8.4 months each. So you can see why I call
today’s 32.6% over 3.2m young. If silver’s new upleg merely proves
average, we have only seen a third of its gains so far!

And despite
silver’s sharp surge in late August and early September on the
anticipation of and then realization of new central-bank inflation
campaigns, it was nowhere near hitting upleg-ending levels of
overboughtness. Remember that the reason uplegs ultimately die is
greed grows too extreme. While this emotion can’t be measured, it
can be inferred from how fast a price advances beyond an established
baseline.

Many years ago I
developed a powerful and profitable trading tool to quantity
whether a price was oversold (the time to buy low) or overbought
(the time to sell high). It is called Relativity, and simply looks
at a price as a multiple of its own 200-day moving average. Over
time in ongoing bull markets these multiples form horizontal
trading ranges. Read my latest essay on
Relativity
Trading to learn the theory.

The chart above
shows Relative Silver, or rSilver, in light red. Since the early
days of its secular bull way back in 2003, the rSilver trading range
has run between 0.95x to 1.40x. At the support end when silver is
trading near or under 95% of its 200dma, it is oversold and a
fantastic buy. Note above on the chart how silver surged in new
uplegs soon after such low oversold extremes were reached. Silver
was too cheap.

Provocatively the
last time rSilver fell down under support was this past summer,
when silver’s current upleg was stealthily born. This is yet
another technical confirmation that its huge correction ended and
the intermediate downtrend has reversed into an uptrend. For those
of you keeping score, I wrote about
how undervalued
silver was at the time. So we started buying and recommending
cheap silver stocks.

The upper
resistance of silver’s relative trading range has been 1.40x. Once
silver rallies far enough fast enough to surge 40%+ above its
200dma, there is a high probability of an imminent major topping.
You can see the rSilver levels of past major toppings in this
chart. They range from 1.29x on the low side (a weak upleg) to
1.75x on the high side (a massive one). Uplegs don’t fail until
silver gets too overbought.

Silver’s young new
upleg indeed had a sharp initial advance in August and September
thanks to the big new inflationary central-bank bond-monetization
campaigns. But despite this surge silver came nowhere near being
overbought in upleg-killing context. The best rSilver levels seen
at silver’s latest interim highs were only 1.14x. This is less
than half the overboughtness that ended even silver’s weakest
upleg!

So not only do
silver’s technicals currently argue overwhelmingly that a
young new upleg is underway, this metal’s bull-to-date upleg
precedent shows it is nowhere near being mature. Silver’s newest
upleg has lots of room to run yet just to grow to average
proportions. And there are plenty of reasons to expect silver
investment demand to surge so dramatically in the months ahead that
merely average is unlikely.

This week just 3
months after the Fed launched QE3, it already felt compelled to
more than double the size of its new open-ended
debt-monetization campaign! It just added $45b per month of
longer-term Treasury buying to QE3’s existing $40b per month of
mortgage-backed-securities purchases. This is not only highly
inflationary, which is very bullish for silver, but it is directly
monetizing Obama’s epic deficits.

Last week I wrote
a popular and highly-praised essay explaining the
US debt crisis.
In his first term, Obama averaged annual deficit spending of
$1274b. This fiscal year’s deficit is expected to be at least
$1100b. Incredibly this week the goofy Fed committed to buying
$540b worth of Treasuries over the next year. This means Bernanke
is directly monetizing half of Obama’s record overspending
going forward!

Our out-of-control
government is borrowing such insane amounts of money in order to
spend it immediately, so all the new dollars the Fed will create
out of thin air to monetize Treasuries will be injected directly
into our economy.
Big inflation is coming, which makes silver incredibly
attractive to investors. The implications of this crazy QE3
expansion (QE3X) will drive major silver demand as 2013 wears on.

For many smaller
investors who feel priced out of the gold market, silver is the only
option for a physical inflation hedge. Provocatively silver’s last
upleg, that massive 177% one, really started accelerating in late
2010 right after the Fed announced QE2. And QE2 was merely $900b in
Treasury monetizations, compared to QE3X’s $540b per year for
what looks like at least several years to come. Talk about
inflation!

And all of this
overlays strong
silver seasonals between now and spring, which ought to really
amplify this new upleg’s advance. As I ponder all of this, it is
hard to imagine all the silver bears today not soon changing their
tune to bullish. And of course bullishness quickly feeds on itself,
leading to more buying and higher prices which entice in still more
capital. Silver is enjoying one heck of a bullish setup today!

At Zeal we’ve been
anticipating this upleg since summer, so we’ve spent many hundreds
of hours since then digging into silver stocks. Our goal was to
uncover the silver companies with the best fundamentals to soar in
silver’s new upleg. Just this week, we finished the latest stage of
this project. Due to popular demand, we undertook our first-ever
deep-research look into the high-potential realm of silver
juniors.

We investigated
nearly 100 silver juniors trading in the US and Canada, and
gradually whittled this universe down to our dozen fundamental
favorites. Each is profiled in a fascinating new 23-page
reportjust
published this week. With silver sentiment poor, most of these
elite silver juniors are trading at dirt-cheap levels. So it’s a
heck of a time to deploy new capital with silver’s new upleg
underway. Our new silver-juniors report is now on sale for just $95
($75 for subscribers), a steal for the fruits of hundreds of hours
of expert world-class research.
Buy yours today!

We also publish
acclaimed weekly
and monthly
subscription newsletters long loved by speculators and investors
worldwide. They draw on our vast experience, knowledge, wisdom, and
ongoing research to help you understand what is going on in the
markets, why, and how to trade it with specific stock trades as
opportunities arise. Since 2001, all 634 stock trades recommended
in our newsletters have averaged annualized realized gains of
+34.8%! Subscribe
today and start thriving!

The bottom line is
silver is almost certainly in the early months of a major new upleg
today. The correction technicals that spawned all the recent
bearishness have all reversed. And after correcting by half, all
the greed that necessitated that massive correction has long since
been eradicated. This past summer’s fear was the perfect birthing
ground for a major new upleg, and silver’s bullish technicals
indicate one is underway.

This is all
happening heading into a seasonally-strong time when central banks
are ramping money creation dramatically. Big inflation is coming,
and as awareness of this grows among investors silver will be a
prime go-to destination as always. The last time the Fed
aggressively monetized Treasuries, silver enjoyed its biggest upleg
of its secular bull by far. And this latest QE3X will dwarf the QE2
monetizations.